tv Nightly Business Report PBS August 16, 2016 7:00pm-7:31pm PDT
this is "nightly business with tyler mathisen and sue herera. questionable prognosis. aetna plans to leave most of the public health exchanges it operates in, joining several other big in question now, is o in trouble? steering the future of how ford plans to get a self-driving car on the road in just five years. and blowing in the win. the answer, my friend, is that the nation's first offshore wind farm is taking shape off the coast of rhode island, ushering in a new era in alternative energy. those stories and more tonight on "nightly business report" for tuesday, august 16th. good evening, everyone. and welcome. aetna is pulling back. the nation's third largest
health insurer is dramatically cutting its participation in health care exchge leavi consumers in those markets with fewer options. and the company isn't pulling back gradually. instead, aetna is doing it all at once. the reason? it's running up big losses in markets where patients are sicker than the company they would be. it is another blow to president obama's signature health reform law and follows the move of two other major insurers. the move raises a lot of questions about the landmark progra aetna says it's cutting aca exchange programs by 70% nationally next year. because after losing $230 million in the second quarter that kind of loss is unsustainable. it is a major about-face fort aetna's ceo who just six months ago said that he p on the excha. critics say the timing is
curious, coming just after the department of justice moved to block aetna's acquisition of huma. >> maybe then they were trying to butter up the department of justice to approve their merger with huma. now, when the governm has opposed the merger, they are saying, well you knoe g su losses it's not such a good investment. it's very hard to know what the truth is. >> aetna says the two issues are separate. but the bottom line for hundreds of thousands of aca exchange plan members is that they are likely to see less choice, likely higher prices next year as three of the nags's largest insurers are pulling back on the he can changes. aetna will be in just four states, delaware, iowa, nebraska, and virginia, down from 15 this year. huma will be in 11, down from 15. and united health in just three states. 34 this year. >> these large losses aren't isolated to one insurance
company. they are systematic. they are occurring across the country. and we could have upwards of a thousand counties next year where there is only one health insurance company offering coverage. >> in one arizona county, aetna, united and the local blue cross plans' exits from the exchange there means residents won't have any carrier to chood from next year. officials say they are trying to find a fix but it's unclear how they can do night we don't know exactly what happens in that instance given there is no fallback in the aca for this occurr. problem that the multistate plans were intended to solve. aetna's departure now means uncertainty for insurers staying on the exchanges next year. >> i think we say see some carriers to need t rates to accommodate the fact there may be less competition. and potentially because they may be inheriting higher risk enrowe rollees. >> analysts say without a fix in
washington to make the exchanges stable and secure it's unsure how long insurers will continue to say in and continue to sell plans. craig garthway joins us now to talk more about aetna's decision and what it may mean for you. it is a assistant professor of strategy at northwestern university's keg ol school of management where he specializes in health care. greg, welcome back. we are glad, as you us a, to see you. the simple question is this -- is the aca failing, falling apart? if not, why not? >> i don't think you can say it's failing. what we are seeing is we are going to have to temper our expectations about what we are going to get from the insurance marketplaces. there are insurers doing quite well, send teen medicaid managed care companies are doing well. but what they are doing is offering plans similar to types individuals.ently these are going to be narrow network plans focused towards
hostelry that tend to see a lot of medicare patients. what we're not going to see or worried we are not going to see is the vibrant marketplace we were all promised where we can go there and shop among six or seven different companies to get the best plan. >> can you call it a marketplace if there is only one player in it and they are not the big players, they are the more narrowly targeted ones? >> keep in mind united and aetna, the companies leaving the he can changes are big national pl any individual marketplace they were in they had a relatively small market share. the local blue cross and blue shield are still the dominant players inside the marketplaces. we do have big insurers there. i think you are right, the idea what we think about a marketplace is we are going to see lots of different companies and we can pick and get the right plan for us. that might not be what we have unless we can get more customers into the he can change. >> what about those sicker
patients tha with aetna now don't have aetna as an option? those other companies might inherit those sicker patients. >> i think that's a real concern. we are going to have to see whether the rate increases that were proposed, which already already quite high, whether those are going to have to go up more to accommodate a very sick patient case load that aetna might have. >> what's the solution here? is it the so-called public option? >> i don't see how public option solves the fact that we have an inhablt to get healthy people into the exchange. i think more importantly we should be looking at solutions that move more people from the employer and large group market and into these marketplaces. those are the individuals who going to be relatively healthy, going to pick ppo style plans, broader network plans that we are more used to. people moving into the marketplace healthier. >> do you think the justice
department stepping in and thwarting the big mergers of earlier this year, do you think that had anything to do with it? >> i saw in your clip that ezeke emmanuel has said that i find that hard to believe. it's not like aetna to spitefully say i'm going to leave because you are not granting my merger. they are losing hundreds had of millions of dollars. they have documented that to the market. they can't lie about that fact. i think maybe their business model right now is not the right model for the he can change. we have to think about that. >> quickly, greg, how do you move those healthy patients out of the employer based system and into the marketplace? what's the incentive for them to switch? >> one thing we have right now is an artificial incentive to keep them in. the aca has a enpenalty for employ that choose to allow their employees to go into the exchange. a lot of people would be better off in the exchange because when you are there you get tax subsidies to purchase your insurance that you don't get from your employer.
at the minimum we could stop having a mandate that limits the employer from having their employees enter these marketplaces. we are sort of shooting ourselves in the foot. >> thank you. health care costs are rising for 65-year-olds. a new report from fidelity shows that a couple retiring this year will need $260,000 to confer those costs in retirement. that is up 6% from last year and 18% from two years ago. the estimate applies to those with traditional medicare coverage and takes into account premiums, copayments, and prescription dru costs. on wall ss retreated today from record levels set yesterday. new economic data and comments from federal reserve officials kept a lid on any gapes. bill dudley the head of new york said in an interview with central bank may raise rates as soon as next month citing strength in the market. another said the economy is likely strong enough to
withstand at least one rate hike this year. on those comments the dow fell to 18452. the nasdaq dipped 32. and the s&p 500 was off 12. the consumer price index which reflects the price that consumers pay for goods and services was unchanged last month primarily because of a sharp drop in the price of gasoline and troesh reese. policy makers have been looking for firmer inflation readings. home builders broke ground on more properties than expected in july climbing to five-month high. housing starts up 2% last month as building activity increased across the board. according to the commerce department permits for future construction dipped slightly. >> the rebound in housing has indeed been very good to home depot. the dow component reported g and sales for the most recent quarter.
the company says big-ticket items are driving sales are as purchases from traditional customers like plummers and electricians. shares fell in trading today along with the broader market. from one dow component to another, apple, which is pledging to invest more in china. but the world's second largest economy is proving a tough ma world's most valuable company. eunice union reports tonight from beijing. tim cook made an unannounced visit to china. the company wasn't forthcoming with the details of his schedule but he has been active on his chinese social med account. by that we can get a sense what have he is up to. he started by meeting a local fashion designer who said that she sketched on the ipad pro. he fitted a fitness gym to see fans incorporating apple watches as part of their fitness regimen. based on photos, he seems to be
promoting apple's latest products to create buzz about the products in china. but he also spent the morning with app developers t h excited the ois 10 system and encouraging them to make more apps for apple products. there has been concern about apple's relationship with the chinese government and what that could mean for apple's future. entrenching the company's popularity of products as well as the apps could bolster apple's position here no matter the relationship with the state. cook also spoke with local journalis who asked him questions about sagging sales for the iphone as well as the growing competition in china. he acknowledged the environment here was more competitive but at the same time he said he is looking forward to the fall. of course that's when the i-phone 7 is expected to be released. small cap stocks are on a roll after a slow start to the year. small cap stocks are adding
gains to the russell 2000 and catching.to their larger counter-parts. the small cap stock is up 8%. can the run-up in small caps last? joining us, chris ripsler manager of the needham small cap fund, congratulations on the performance. why do you think -- you are bullish for the rest of the year on the small caps. what's the background to that? >> we think global interest rates will c remain low across the interest rate curve. the centra banks are continuing to be accommodative which is pushing investors out on the risk curve. so what we've seen since february is a recovery in shawl caps which followed the recovery in the high yield markets which sank quite hard last year with the energy decline. on a relative basis, small caps are compared to high yield bonds many times, and so as we see
that strength we think that the small cap rally can continue. it certainly had a good run this summer. what we are seeing more of is nicer better volume this summer than we have seen in the past years. i think that gives people more confidence to get into the small cap area. where in past years the volume has been very light and sometimes they cop trapped in those names. >> our viewers sit there and hear 8% for the russell 2000. this guy is up double that they want to know what your secret sauce is, chris. tell us what stocks have powered your portfolio to that -- where have you been concentrating. >> first and foremost we concentrate on good management teams. we focus in the growth area. technology has been very good. health care has also been good for us. in technology what we've seen is a return of the m and a activity. so larger companies are looking into the smaller cap companies to buy growth where at reasonable valuation they can buy in and then take that on a
much bodder basis. >> talk about your three stock picks that you gave us. you say you are excited about ultraclean technologies. >> ultraclean technologies is exposed to the semicap equipment sector which has been doing very nicely after intel's delay of its 10 nanometer rollout last year. those dollars are being spent here in the second half. ultraclean benefits by being a supplier in that display chain. >> your last two are amber road and pdf solutions. give me thumb nails on those. also tell me -- you mention m and s activity is a big part of some of the growth. do you go looking for companies that could be takeover targets or do they just happ they mostly happen. it is a hard way to invest to just do m and n, but we are a long term beneficiary of these targets which do get taken out. when you look at its business,
it's beginning to add customers. what it does is it solves solutions in the cloud for global customers. so around trade. and so things like brexit and other treaties out there for trade, amber road really benefits and helps its customers navigate those changes. we think there is a big opportunity. and pdf solutions, pdfs. >> another great company that solves problems for semiconductor companies, which helps to improve its yield manufacturing. yield is convince essential in getting the highest profits within the found dairies so they are helping as intel is rolling out, companies like to the drive higher yields. >> chris, congratulations on the performance. thank us. >> thank you for having me. >> chris retsler with the needham small cap growth fund. still ahead, big plunge, the troubling news that took one stock down 26%.
ford is doubling down on self-driving cars. the automaker has plans to sell a fully autonomous vehicle in just five years. will that move ease concerns that ford was losing the race to build the car of the future? phil lebeau has our story. >> reporter: ford is steering toward a future where increasingly it's the vehicles, not the people behind the wheel, that will actually do the steering. in fact the automaker now expect a self driving vehicle by 2021. ford won't say exactly what the vehicle will look like but it won't have a steering wheel or pedals. and ford says it will be a commercial model being driven by raid share companies.
it's part the ceo's push to transform the automake a mobility company driven by technology and new ways to look at cars and trucks. >> we view the next decade as being defined by the automation of the vehicle. our view is autonomous vehicles could have just as much significant impact on society as ford's moving assembly line did 100 years ago. >> reporter: unlike 100 years ago when henry ford moved faster than the rest of the auto industry ford finds itself fighting the perception that are the ones leading the push for self driving cars. fields says thre wrong. >> we've taken our time to talk about our autonomous vehicle plans because we are not in a race to make announcements, but we are in a race to do the right thing for our customers and our business. >> r that could include ford getting into ride sharing, an industry dominated in the u.s. by uber and liyft. ford is running a ride share
pilot program in england. and its expanded r and d center in palo alto is looking at other technologies, transforming how we get around. in fact, ford has announced new investments or partnerships with four companies that specialize in technology for self driving vehicles. ford's ceo mark fields is adamant the company will be ready when drivers eventually take their hands off the wheel. for "nightly business report, i'm phil lebeau in chicago. >> to read more about ford's push into self driving cars head to our website, nbr.com. pain celeste teal delays, its result. that's where we begin. tonight's market focus. the maker of organic foods said accounting issues prevented the company from reporting this year's results and they will not be release until a review of the company's financial practices is completed. in addition, hain also said it will likely miss its previously announced yearly guidance. shares fell 26% on that
unsettling news, to $39.35. weak commodity prices and the impact of a deadly mine disaster in brazil called bhp brillaton to post more than $6 billion quarterly loss. the mining firm also reported a deline in revenue and said it would slash its dividend 77% to 14 cents a share. shares were up 30 cents nonetheless to $31.50. and profit and revenue rise at dig's sporting goods, topping expectations. the athletic gear and apparel company said there was less of an impact from the liquidation of rival sports authority than dick's initially anticipated. a better than expected results also prompted the company to lift its full-year guidance. shares for the day up 7% at $58.76. robust foot traffic lifted results at tjx helping the owner of discount stores tj max and marshals to top estimates.
those results prompted the company to raise its forecast for the years. shares ini fell on weaker than expected guidance for this quarter. tjx shares were down more than 5.5% to $77.97. activist hedge fund valuac took a stake in morgan stanley. the hedge fund which has called for change at other companies isn't attempting to do that at morgan stanley. instead, value ac said it is supportive of the company's ceo james gorman. a historic moment for lower manhattan. the world trade center malary opened today. the builders hope it will be a symbol of the progress made in revitalizing the area in the 15 years since the september 11 attacks. we are >> reporter: formal operated oar westfield it's been more than 15
years coming. in july 2001 the mall operator signed lease to begin expansion of the world trade center mall. six week later the world changed on september 11th. today after a flag raising ceremony outside the mall westfield world trade center opened for business. westfield's coceo says professionally it is a proud day. personally it is an emotional one. thousands was family members and friends of those who died on september 11th are here. >> very respectful for what took place on this spot. it will be forever remembered. but what's really important is also to cause the resurrection of the site. this is a place of culture, community, and commerce. for westfield, it's particularly significant because we are opening what we believe is now a global flagship, setting a new global benchmark with retailers and consumers and how they interact with one another in one of the most magnificent buildings on the planet.
>> there is 50,000 feet of retail space housing thousands of plan. plus famed chef mario buy tally's eataly restaurant. while many american malls are fighting declining shopper traffic it shouldn't be a problem here. more than 15 million tourists are expected to visit this new york city neighborhoo next year. plus there are 13 subway and trin lines shuttling 300,000 commuters to the train station below every day. westfield has infused many of its 34 shopping centers in major cities in the u.s. and the uk with technology. but lowe says this world trade center is by far the most state of the art. >> it's probably got the best backbone, fiber optic backbone, wi-fi, camera system, of course immense focus on security. this will probably be a
blueprint for all of our future buildings. >> westfield world trade center hopes to be a mall for the future that keeps a respectful eye on the past. for "nightly business report" i'm courtney reagan in new york city. coming up, an offshore project enters its final stage. it's marking a big milestone for america's growing . finally tonight there has been a big push to find new clean ways to power the plan echlt but it has been an uphill climb for a number of reasons, including high costs and regulations. but one of the solution is taking shape now just off the
coast of rhode island. that's where jackie deangelis is tonight. >> reporter: it cost $300 million to build. but just three miles south of block island construction of the first u.s. offshore wind farm is nearly complete. when operational in early fall, this 30 mega watt project will provide energy the roughly 17,000 homes. that covers the island, and a little more. the project is the first of its kind in the united states. estimates suggest that it will reduce consumer power cost here by roughly 30%. important to this community, where energy costs are among the highest in the nation. keep water wind, the company turbi wd farm used private funds the construct it will receive a government subsidy in the form of a 30% tax credit. th wind turbine behind me is almost 600 feet tall, three miles off the southernmost point
of block island. why this project is so important is because people say it lays the blueprint for projects to come. and deep water is using that blue print to plan its next project, an offshore wind farm between block island and ma that's vineyard that would generate a thousand mega watts of power for long island. >> i think in the next decade or so we'll see several giga watts of offshore wind build built. the opportunity is much much more than that because we have wind off the northeast coast. >> reporter: the department of energy says nearly 16,000 mega watts of offshore wind projects are in various stages of development. analysts think growth will be high in the coming years. but these projects have their critics. some unhappy homeowners say offshore wind farms are an eyesore that will hurt property values. >> i thi that's one of the huge concerns, that the property values could be a lot less now because you have got this structure, these structures you are looking at instead of a beautiful view of the ocean. >> reporter: while this brings
down energy costs on the island, the rates that have been locked in are double what homes on the mainland pay. for "nightly business report" i'm jiky deangelis on block island, rhode island. >> we'll keep track of that one. >> looks like it with work nicely. >> that's it for "nightly business rep m sue herera. >> i'm tyler mathisen. have a great night everybody. see is brought to you by...
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